Mixed Fortunes for Property in Pallas’ Ninth Victorian Budget

Mixed Fortunes for Property in Pallas’ Ninth Victorian Budget

Mixed Fortunes for Property in Pallas’ Ninth Victorian Budget

By The Urban Developer 2023, Marisa Wikramanayaketue, 23 May 2023 <https://www.theurbandeveloper.com/articles/victoria-budget-2023-2024-property-sector>

Victoria is in better shape than ever, according to state Treasurer Pallas who has delivered his ninth budget.

“I am delivering the Victorian budget 2023-24 and I do this amid a booming jobs market, a healthy economy and every sign that the state has bounced back,” Pallas told the parliament as he handed down the budget. 

“Our economy is performing well. The unemployment rate is below 4 per cent as it has been for most of the past year—which hasn’t happened for nearly 50 years.”

Here are the announcements contained in the budget that The Urban Developer has indentified as having the most impact on the property sector.

Housing

Property investors and holiday homeowners will pay an average of $1300 more in land taxes which will raise $4.7 billion.

Most of that will go towards the $8.6-billion Covid debt that Pallas wants to pay off.

Absentee property owners will cop a surcharge increase to 4 per cent from 2 per cent to bring it into line with the rate in New South Wales.

The tax-free threshold for land tax will also be cut to $50,000 from $300,000.

Pallas said it was imperative that with increasing house prices and rents and land values more investors shoulder their part of the Covid debt bill.

“We’ve structured the repayment plan in a way that’s reasonable and proportionate to those with an ability to pay,” Pallas said.

The debt is expected to be paid off by 2033.

▲ Victorian Treasurer Tim Pallas: his budget includes help for homeowners whose builder goes bust.

Homebuyers will also get some relief with the state revenue commissioner given the ability to extend the land tax exemption on principal places of residence if the builder becomes insolvent.

A limit of two additional years will be imposed and it will only apply from January 1, 2024 for places under construction or renovation.

Between these measures and the stamp duty reform, house prices are expected to decline by 3.5 per cent over the rest of 2023 before increasing again in 2024.

▲ Part of the construction works being carried out on Victoria’s Metro Tunnel project.

Infrastructure

“We are not going to cut back on the mortgage payments that fund our Big Build but we are going to pay off our Covd credit card bill,” Pallas said, signalling that much of Premier Daniel Andrews’ Big Build plans will continue.

Many of the Big Build and other infrastructure projects in early planning stages have been put on pause while the federal government conducts a review of all major infrastructure projects.

Another $7.3 billion was allocated in the Victorian budget for transport projects, adding to the $112 billion already spent or allocated towards major transport projects since 2014. 

The budget includes $2.8 million for maintenance and upgrades for flood recovery work on roads across the state including $1.8 billion for regional areas.

There will be $42 million put forward for neighbourhood batteries to help residents access renewable energy even if they cannot have solar panels on their homes or apartment buildings.

Another $4.9 billion is earmarked to upgrade hospitals and healthcare assets across the state and support the healthcare workforce. 

But one of the biggest announcements is the return of the State Electricity Commission a public sector organisation previously privatised. It will focus on driving renewable energy creation and consumption. 

There will also be $6 million put forward for the 155ha Bendigo Regional Employment Precinct so the City of Greater Bendigo can install power and water infrastructure, and planning works at the site. 

Another $10 million for the Growing Suburbs Fund will support providing critical local infrastructure in key fast-growing suburbs. 

And an investment of $12.3 million is expected for Victoria’s new centres to manufacture mRNA vaccines. 

Workers and skills shortage issues

There will be $738.6 million to help workers get trained with $186 million to expand the Free TAFE program.

More than 137,00 students have saved $340 million in fees since the Free TAFE program started in 2019 with its once-per-lifetime limit removed, allowing workers to return to retrain or upskill.  

New TAFE campuses are planned for Melton and Sunbury along with a disability and student services hub at Gordon TAFE in Geelong, all funded by $170 million for the Building Better TAFE Fund. 

“TAFE is training Victorians for jobs now and for the future—we’re backing more Victorians to get the skills they need for careers in in-demand sectors, and building better TAFEs right across the state, ” Victorian training and skills and higher education minister Gayle Tierney said. 

A Clean Energy Fund, first promised along with the SEC, is also on the cards.

Another extra $90.5 million will subsidise vocational training with another $90 million for priority skills training and job placement support via TAFEs while $3.8 million will be spent reviewing and updating the curriculum and assessment resources. 

The skilled migration program will also get a $3.1-million boost to attract more workers. 

There will also be a new $4-million mental health training program for apprentices and a further  $1.5 million for the Apprenticeship Taskforce to ensure fair treatment for all apprentices. 

Jobs Victoria will get $35 million to support vulnerable jobseekers and another $36.2 million is earmarked to help local businesses expand and boost productivity via research and development grants. 

LaunchVic’s Alice Anderson Fund will get $5 million to support 70 women-led startups by 2025, while the Fair Jobs Code, which came into effect in December 2022, will get $2 million to help its rollout. 

An Australian first, the Gig Worker Support Service will get $9 million to ensure 350,000 gig economy workers get support and advocacy. 

The International Investment Attraction Fund will get $20 million to attract global companies with another $12 million for the Boosting Victorian Exports program to grow our $50-billion export sector. 

Wage Inspectorate Victoria will get $6.7 million to investigate underpayment claims and run education campaigns. 

Worksafe will get a new dedicated inspectorate with 20 specialist inspectors funded by $24.1 million to ensure workers are safe within the construction industry. 

“Too many construction workers are injured on the job—we’re taking action to make building sites safer and hold irresponsible employers to account,” Victorian minister for worksafe and TAC Danny Pearson said. 

Another $2.4 million will also be allocated to help more women enter the construction industry through the Big Build program. 

Community projects

A total of more than $200 million to improve facilities for more than 100 local sporting clubs was announced.

This includes $15 million for the Frankston Basketball Stadium redevelopment and $15 million to upgrade the Benalla Indoor Recreation Centre.

An extra $23 million for the Major Events Fund is expected to attract several large events, shows and sports competitions to Victoria which will potentially provide work for developers keen to work on facilities or assets that can benefit from the events.

▲ A render of the proposed redevelopment of the Frankston Basketball Stadium.

Around $2 million will be used to provide music education in schools as well as a planning overlay to protect live music venues. 

Minister for Regional Development Harriet Shing said a Tiny Towns Fund will be launched with $10 million for regional and outer suburban areas of up to 5000 people to fund projects that drive community building and tourism.

“Our smallest towns are so important to rural and regional Victoria and we’re delighted to invest in these communities as part of delivering liveability and pride of place to every part of the state, now and into the future,” Shing said. 

There will also be $19 million invested in the Suburban Revitalisation Boards to work on local priorities with $1 million for renovating and repairing Cranbourne Public Hall. 

Revitalised cultural hubs in Box Hill, Chinatown, Dandenong, Oakleigh, Elsternwick, Footscray, Richmond and other key locations will get $17 million to boost local jobs. 

“We’re backing the small businesses that sit at the heart of communities – revitalising our multicultural precincts, supporting traders’ groups and creating local jobs,” Victorian small business minister Natalie Suleyman said.

Office and industrial

The first major change is Premier Daniel Andrews’ stamp duty reform which will eliminate stamp duty for commercial and industrial properties.

This is expected to boost business growth and expansion and encourage investment in office space and warehouses and other industrial and logistics assets.

As part of the Economic Growth Package in the budget, the stamp duty system will transition to an annual property tax from July 1, 2024.

It will also abolish business insurance duty.

Victoria’s economy is expected to increase by $50 billion in net present value terms as a result of this change with new jobs created.

From July 1, 2024 all commercial and industrial properties will transition to the new system as they are sold with a ten year period to pay the annual property tax.

Buyers will have options to pay the final stamp duty liability as a lump sum immediately or pay the tax in fixed installments over a ten year period through a government-facilitated loan.

The tax will be set at a flat 1 per cent of the property’s unimproved land value.

Current owners are not included in the new system until the property is put up for sale post July 1, 2024. 

It is believed that removing stamp duty will help businesses get established and free up capital to be used on the buildings, construction or hiring workers. 

“Business and industry have told us they want this reform and we’ve listened,” Victorian treasurer Tim Pallas said. 

“These landmark changes will enable businesses to be more dynamic and agile, and to grow and employ more workers.”

The reform does not apply to residential properties with the Victorian government saying it will consult with business and industry to work out the final form of the transition to the new system. 

Victorian Chamber of Commerce and Industry’s chief executive Paul Guerra is one of those that has already consulted with the state government. 

“This is exactly the type of progressive tax reform that is required to free up stamp duty charges which will accelerate building upgrades, stimulate investment in commercial property and free up more capital,” Guerra said.

Supply chain issues

The Victorian government has also announced an expanded transition support package for timber workers to move from native timber logging to plantation timber and other industries such as construction, agriculture, transport and manufacturing.

It means that with this budget’s addition of $200 million, there is now more than $875 million in state government support for the transition to plantation timber to help resolve supply issues.

Supply and work has been hampered by court and legal actions and severe bushfires over the past few years. 

The Victorian government said there is a lack of alternative timber supply locally and internationally to make up the shortfall and that there are no regulatory reforms that can be put in place to prevent future legal actions. 

It will instead put workers through the Free TAFE program to retrain in certain industries along with $8000 in retraining vouchers available for other TAFE courses.

Out-of-pocket costs for accessing and access to mental health assistance for workers and their families will also be provided as will industry support payments.

There will also be considerations around managing the 1.8 million ha of timber harvesting allocated public land and several programs set up to help businesses start up, grow and transition to plantation timber. A program to help other businesses switch to plantation timber supply will also be created. 

▲ Timber supplies are in the sights of the budget with a number of measures announced.

It means a part of the supply chain woes faced by the industry recently might be resolved sooner than expected.

“That’s why we’re stepping up to give these workers—and their communities, businesses, and partners along the supply chain—the certainty they deserve,” Premier Daniel Andrews said. 

Victoria’s key defence sector supply-chain projects will also receive a $4-million investment.

Cost of living

There will be $400 million allocated to provide another round of the Power Saver Bonus for families.

Regional public transport fares will be capped at metro rates with $190 million allocated to help it happen while $141 million is provided to install air conditioners across more than 40 high-rise public housing towers.

Around $90 million will be allocated to digitise essential government services with $50 million provided for families to access public fertility care.

Veterans will get assistance via a Victorian Veterans Card to help with the cost of living allowing them to access discounts which is funded by $42 million in a program. 

Free period products and access to machines providing them  at 700 public sites across the state will be funded by a $23 million allocation. 

The Baby Bundle program will be funded over four years with $17 million to help new parents transition into parenthood.

The Smile Squad free dental program will be expanded with $17 million for school age children to access dentist services.

Solar Victoria will get $16 million to provide interest-free loans to install solar battery storage systems in homes. 

Tradies and apprentices will get free car registration offset by a $10 million allocation. 

The Urban Developer 2023, Marisa Wikramanayaketue, 23 May 2023 <https://www.theurbandeveloper.com/articles/victoria-budget-2023-2024-property-sector>

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